The number of people sleeping rough increased by 134% between 2010 and 2016, the NAO said.
Photograph: Andy Hall for the Observer

A sharp rise in homelessness over the past five years, fuelled by increasing private sector rents and cuts in housing benefit, is costing the public purse more than £1bn a year, according to a report by the government’s spending watchdog.

Homelessness has increased every year since 2010, with rises in rough sleeping and households living in temporary accommodation, but ministers have been slow to understand the problem or take a strategic approach to tackling it, the National Audit Office (NAO) says.

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It criticises ministers for taking what it calls a “light touch” approach to dealing with homelessness. “It is difficult to understand why the Department [for Communities and Local Government] persisted with this approach in the face of such a visibly growing problem,” it said.

Ministers have no grip on the causes or costs of rising homelessness, and have shown no inclination to grasp how the problem has been fuelled in part by housing benefit cuts, the NAO says. It concludes that the government’s attempts to address homelessness since 2011 have failed to deliver value for money.

More than 4,000 people were sleeping rough in 2016, according to the report, an increase of 134% since 2010. There were 77,000 households – including 120,000 children – housed in temporary accommodation in March 2017, up from 49,000 in 2011 and costing £845m a year in housing benefit.

Meg Hillier MP, the chair of the Commons public accounts committee, said the NAO had highlighted a national scandal. “This reports illustrates the very real human cost of the government’s failure to ensure people have access to affordable housing,” she said.

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Labour said ministers’ ideological approach had exacerbated the crisis. “The increase in homelessness since 2010 is visible in almost every town and city in the country, but today’s report shows ministers haven’t even bothered to draw up a proper plan to deal with it,” according to the shadow housing minister, John Healey.

A government spokesperson admitted there was “more to do” to make sure people always have a roof over their head. Ministers would shortly announce plans to deliver on the government’s commitment to eradicate rough sleeping.

“We’re investing £550m to 2020 to address the issue and implementing the most ambitious legislative reform in decades, the Homelessness Reduction Act,” the spokesperson said. “This act means more people get the help they need earlier to prevent them from becoming homeless in the first place.”

Homelessness has grown most sharply among households renting privately who struggle to afford to live in expensive areas such as as London and the south-east, the NAO found. Private rents in the capital have risen by 24% since the start of the decade, while average earnings have increased by just 3%.

Cuts to local housing allowance (LHA) – a benefit intended to help tenants meet the cost of private rents – have contributed to the crisis, the report says. LHA support has fallen behind rent levels in many areas, forcing tenants to cover an average rent shortfall of £50 a week in London and £26 a week elsewhere.

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The consequence is that the ending of private sector tenancies, normally because the landlord seeks to raise rents beyond what existing tenants can afford, has become the biggest driver of statutory homelessness in England, accounting for a third of all cases last year.

Local authority attempts to manage the crisis have been hamstrung by a shrinking pool of council and housing association homes, coupled with a lack of affordable new properties. London councils have been offering reluctant landlords £4,000 to persuade them to offer a tenancy to homeless families on benefits.

Housing shortages in high-rent areas mean that a third of homeless households are placed in temporary housing outside their home borough, the NAO said. London councils are buying up homes in cheaper boroughs outside the capital to house homeless families, in turn exacerbating the housing crisis in those areas.

Cllr Martin Tett, housing spokesman at the Local Government Association, said: “Councils are working hard to tackle homelessness and are focusing on preventing it happening. We now need the government to support this local effort, by allowing councils to invest in building genuinely affordable homes and providing the support and resources they need to help prevent people becoming homeless in the first place.”

Polly Neate, the chief executive of the housing charity Shelter, said: “The NAO has found what Shelter sees every day, that for many families our housing market is a daily nightmare of rising costs and falling benefits which is leading to nothing less than a national crisis.”

Matt Downie, the director of policy and external affairs at Crisis, said: “The NAO demonstrates that while some parts of government are actively driving the problem, other parts are left to pick up the pieces, causing misery for thousands more people as they slip into homelessness.”